There is a nice writeup at CNN-Money.com that lays out a proposed blame schedule for the subprime mortgage debacle. On the surface it seems pretty accurate, given the available data so far, but I find it difficult to get behind a couple of their assumptions.
Wall Street's eagerness to bundle & securitize the subprime loans, while probably not as transparent as investors would have liked, was a fine way to spread risk. The Street is always looking for new instruments and collateralized debt obligations were the flavor du jour.
The article lays the Fed blame at the feet of Greenspan who used housing as a major monetary prop after 9/11. It's always dicey to focus on a single sector but it seems like it was a Hobson's Choice for Greenspan since housing-related sectors comprise about 40% of the GDP my guess is he was looking for the biggest bang for the buck.
Personally, I'm castigating the brokers, lenders and borrowers who, knowingly or not, were playing a fast and loose game with easy credit.
Comments (2)
They were lending to some folks here with below 630 credit scores, and 630 sucks as a credit score. My broker told me this was going to happen two years ago, and to keep an eye out for the house I might want, because it'll go on the market at a reduced rate.
Posted by Jane 1958 | September 9, 2007 5:51 AM
Posted on September 9, 2007 05:51
Yeah, that's the part that gets me. So many people involved *knew* that the borrowers creditworthiness had not changed, only the conditions of the credit market, and they rolled the dice anyway.
I hope you found that house that looks good to you. Credit will be a little tighter for even the well-rated borrowers since there is less capital to go around and the lenders are a little gun shy.
Posted by machine | September 9, 2007 8:00 AM
Posted on September 9, 2007 08:00